'Good news' for homeowners as Bank of England interest rate cut to see mortgage repayments drop by £384 a year

The average UK homeowner with a 75 per cent loan-to-value ratio on a tracker mortgage could see their monthly payments reduced by £32, or £384 annually, if a 0.25 percentage point cut is implemented, according to research by TotallyMoney.

This follows a similar cut in August, which could result in a combined saving of £63 per month or £756 per year for affected homeowners.

The base rate is currently five per cent, but experts predict it will drop to 4.75 per cent.

The move comes as the UK housing market faces challenges, with arrears expected to rise to 128,800 this year from 105,600 previously.

Homeowners in areas with higher average property prices could see more substantial reductions in their monthly payments.

Savills predicts a 23.4 per cent growth in UK house prices over the next five years, with the north of England expected to see the biggest increases. The northwest could experience a 29.4 per cent boost, while the northeast may see a 28.2 per cent rise.

However, London and southeast markets are likely to see slower growth due to already high property costs. The overall projected price rise across the UK is equivalent to an 11 per cent increase in real terms after adjusting for inflation.

Alastair Douglas, CEO of TotallyMoney, commented on the potential rate cut and said: "While the days of one to two per cent mortgages may feel like a distant memory, the Bank of England's rate cut will feel like good news to many. And hopefully, we'll see the trend continue into 2025, and beyond."

He urged banks to pass savings on to borrowers rather than just trimming interest from savers.

Douglas advised homeowners facing financial difficulties to contact their banks promptly.

He said: "It might feel daunting having to pick up the phone and explain your situation, but lenders have been told by the government that they must act in the best interest of their customers.

"Around 4,000 homeowners will be seeing their current, cheap mortgage deals coming to an end each day. But it’s important not to wait until then before locking in your next offer. Otherwise, your bank will put you onto their Standard Variable Rate — and these can reach almost nine per cent, resulting in a significant hike to your monthly payments. So start shopping around up to six months in advance.

"That’ll also be a good time to check that your credit report is correct and up to date. And if you find anything that doesn’t look right, you could file a request to fix any errors. That way you’ll put yourself in the best position to get the best deal for your situation.

"If you’re a saver, you should double-check the interest rate your bank is paying you, and if it’s not sitting comfortably above the current inflation rate of 1.7 per cent, then it’s time to move your money. Loyalty doesn’t pay, but some easy access accounts are offering customers more than 4.50 per cent."

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Andrew Hagger, Personal Finance Expert at Moneycomms.co.uk added: "Mortgage customers are overdue a bit of good news, and a rate cut will help them feel more positive about their finances as they head into 2025."

He noted that consumers are still grappling with household budgets, but a second cut in four months should alleviate financial anxieties.

He said "For those currently on a fixed rate mortgage, the financial benefit won’t be felt immediately but it should make a worthwhile difference next time they come to review their fixed or discounted deal.

"People will be hoping there are more cuts to follow in 2025 and that mortgage repayments will return to more manageable levels."